tv On the Move Bloomberg February 16, 2015 3:00am-4:01am EST
-- 20,000 greeks rally in athens, urging the greek government not to back down. tensions grow over a contested held -- hub. futures markets just a little lower. dax features down about a quarter of 1%. you look at japan, the nikkei goes through 18,000, poses at that level for the first time since 2007. the dax closing at a record high. manus cranny with the market open. it looks like we're going to come off the highs. >> everything is looking so robust. discussions of greece. both of those are very fragile. greece was up 11%. the dax rope through. you are talking about the nikkei breaking through. u.s. equity markets breaking
records last week. the dow jones breaking higher. it is a discussion, more on greece. will they do a deal? the federal reserve minutes coming out. we also get bank of england minutes. the euro is taking a little bit of a breather in equities. telecom is where we are seeing most of the action. in the sidelines patrick draghi , the billionaire, they bought the portuguese assets. it is proposed they will put 8 billion euros on the table. that will give them a total of 30 million wireless customers. we are waiting on the big gaming company and the united kingdom. they were in talks to do a deal.
the stock closed at 170.75. that stock is down. those are three of the individual names. gaming stocks are going to be in focus. let me show you the bigger trend. what we have got is some trending areas. on the bottom right-hand corner, you are seeing it down. disappointing retail sales. the dollar is a little bit lower. you are seeing some of the commodity currencies trading higher. the yen strengthening overall. it is the longest rally and
again. people do not believe the bank of japan is going to pull out the guns again. >> thank you very much. that is japan, and that is the big story. hobbling its way to growth, data released show japan exited the recession but it was much weaker than expected. james joins me from tokyo. i guess the big question is what was behind the big miss. >> good evening. the reason for the week gdp growth is the same as it has been for the last six months. consumer spending was week. company investment was not there. consumers cut spending after the sales taxes increased.
it has not recovered in nine months and that happened. that is also with companies being much more conservative in their investments. there was no investment by companies. those combine to drag down gdp numbers we saw today. the result is the economy didn't grow at all. japan back in a recovery, or the economy is recovering, but nowhere near what they were expecting. >> when i sit in my terminal and weak data comes out, the knee-jerk reaction is to look at the data and say, what is corroded going to do? -- coe roda -- karoda going to do? >> they came out with the growth forecast. they said it was going to contract 0.5%.
the economy is going to have to grow 9% in the current quarter. that is not going to happen. growth is not going to reach the conservative estimate. that is going to increase speculations the bank of japan is going to have to increase stimulus to help hold the economy into a more robust recovery. at the same time governor corona has been very clear when he says he expects oil prices to lead to a better recovery so they don't see at this time any need for further stimulus. we had a story from people outside the bank of japan saying they are worried further stimulus would lead to an excessively weak yen, and that would hit consumer confidence, which is very weak even now.
they are looking to hold off on stimulus for the time being. the numbers are not good. that doesn't mean the bank of japan is going to jump in with stimulus anytime soon, if you base it on what they said in public statements. >> thank you very much for joining us from tokyo. i am looking at japanese market. some big moves. the nikkei closes above 18,000. the move is not restricted to the equity markets. check out the 10 year government bond deal. we have gone from 0.2% in the 10 year, and in a month the yield has doubled to 0.44%. what has come and gone in japanese markets? we are joined by the head of the global strategy team. great to have you with us. you saw that picture of the 10
year. it is still low. what is the bond market telling us right now in japan? >> i think the bond market is telling us the bank of japan being in the room, when we see trading going through we believe we have seen some of the pension funds rotate towards equities. you get volatility going through. they're in mind the moves we have seen in the backend of the japanese government market have been mirrored in other markets as well. ten-year yields coming around 2%. i don't think this is purely a japanese phenomenon. i think it is amplified because of the low yields we have seen. >> might we be seeing what you have touched on, the great rotation that has not happened? is it happening in japan right
now? >> there are elements about that. there is still a lot of demand for government bonds. bonds have put in $600 billion of excess demand in 2015. it is likely that keeps yields suppressed. certainly in japan the government pension fund have again to move towards equities that are domestic and international. i think we are seeing some element of that. when they relax their patterns you can expect volatility. >> gdp is still weak. headline inflation numbers, you strip out the tax hike still very weak. the labor market, that is a different story. unemployment down to about 3%. i look at the job seekers and
jobs available ratio. you tell me. the tightening of the labor market, when does that start to translate to significant wage growth? >> he has been asking companies to increase wages. ultimately, when you look at inflation, something coming through stimulus is not necessarily permanent, or necessarily a virtuous circle. wage growth at a modest level will allow consumption boost, which will allow the company to get going. what we are seeing, let's look in context. we have got japan going in the right direction. we are tending to see a move upwards, a gradual closing of the gross cap. the u.s. is doing well. other regions are beginning to close the growth gap. that tends to be good for confidence. it tends to be good for equity markets. it tends to be good for earnings expectations. that is probably translating to a boost for the nikkei.
>> you're feeling a little more confident about japan. will you feel more confident about europe? euro finance ministers are doing it again in brussels. it is the showdown and a big question. who blinks first? let's check in on our top stories. stepping up plans for a takeover. tesco is said to be cutting thousands of jobs in its turnaround effort. you see tesco climbing a third of 1%. hsbc, the big corporate story. we are sorry. that's the message from the ceo. he offered his sincerest apology for the role in helping customers even aid taxes. -- of aid taxes. we will talk recent europe after the break. -- evade taxes.
interview, telling the german radio station he is very skeptical, dampening expectations. are we going to get a deal? it looks unlikely. >> it does indeed look unlikely. he said he is not optimistic. what he has heard about technical talks taking place presumably he has been briefed. he doesn't like the dataset. they are closing the greek -- accusing the greek government of behaving irresponsibly. all this comes on the heels of a cartoon that depicts mr. sheuble as a not see. we should -- a nazi. we should note mr. tsipris has condemned the cartoon. also worried about whether greek exit would do to the greek economy. he says it would be bad.
it seems the europeans, the other finance ministers are a little negative heading to this meeting, and the greeks seem a little more optimistic. here is what mr. tsipris said. i am full of confidence. you can look at the crowds. wendy thousand in athens -- one -- 20,000 in athens -- one of two ways. they are going to demand radical restructuring of the bailout package. the greek government has some leeway. there is a poll that says 61% of greek support the approach the government is taking. that may give more room to compromise. from what we have heard this morning, the germans aren't in a compromising mood. >> the bar is low going into this one. let's bring in the global head of the strategy team. i want to talk about the real
impact. the finance ministers are talking about greece and ukraine. leaders distracted. what is the real economic impact of that? >> if we look at the actual numbers in terms of economic impacts, berlin is positioning on the basis they believe there is a contagion risk that is very contained compared to worry where -- where we were in 2012. perhaps the biggest concern is the implications for other they'll out nations. -- bailout nations. if greece were able to carve out a favorable deal that would be off putting to peripheral nations. we have heard they really want to see the european union take a hard line with greece on this. it is not so much berlin that are pushing back. we think it is the eurozone wide concern. >> you are looking at spain?
>> bear in mind they have an election later in the year. have seen a rise in populist arty support so anything that rewards -- party support, so anything that rewards might be deemed unreasonable requests would not go down particularly well across peripheral nations. we would expect berlin would hold the line. it looks like they have support from eurozone counterparts but this is playing out very european-style. what we are seeing is a prolonged protracted investigation. i think markets are taking comfort that we are still in that negotiation. >> who has the leverage? will this come down to the wording of the agreement? it seems as if the greeks want to write down. the rest of greeks don't want to call it a write-down. will it be a write-down in all but name at the end of the day?
>> technocrats have had a lot of practice at this. they want to see around 30% of the bailout agreement taken off the table. what we don't know is what is in that 30%. there is room for negotiation. what the technocrats end up with remains to be seen. if we look at how european negotiations take place over previous rounds typically we go right up to the wire and slightly beyond. it is unclear as to what exactly the nature of the bailout deal might be. it is something we should be comforted by, the fact that we have got both parties at the table it negotiation. >> a quick question on markets. if you became distracted by this political noise the dax just coming off an all-time high, do you take out the noise and just say bye?
>> first and foremost you have the ecb with an unlimited qe program. as much as it takes as long as it is needed. it could be extended. secondly, we are beginning to see the european economy shows signs of recovery. gdp data was very positive. what we have is a little momentum holding. what we have seen, when you are pushing an open door with stimulus, it's a good time to buy. when you look at when the old program was operated, when the ecb were in the market buying, we tend to see a positive reaction across risk asset classes. we may have been distracted. those who look at politics may have in distracted. if europe is genuinely turning a corner with the support of the ecb, there could be a lot more to play.
>> welcome back. the delicate cease-fire. kiev has reported violations. the the e.u. added nine more entities to its sanctions list. what exactly is the status of this truce, and why are we seeing new sanctions out this morning? >> they have said the truce has largely been respected during the first day of the truce, which started yesterday. there are plenty of violations, especially in the key town. there is concern that has been voiced by u.s. military and
intelligence officials that the rebels will not respect the troops -- truce and will continue in this key area which links cities, which are controlled by the rebels. >> a big thank you for that. we are going to bring in john for final thoughts. the tension continues somewhat. it is having a market impact. i was looking at the stock. it comes off a little bit off the highs of the day. have you traded on this at all? has your strategy changed as talks progress? >> to be fair, we are taking a longer picture. one can't get away from the importance of geopolitical tensions of this type. the biggest effect for us is
coming through confidence. what we have seen is the beginnings of a fragile recovery . notably, if we look at the survey in germany, we have seen it begin to rebound. it would be damaging if we saw further escalation in terms of german confidence, particularly after the dax made new highs. that is a consideration for us. we would tend to look where in europe where it would be more confident as being the main impact in terms of geopolitical tension. >> in terms of politics and political distractions, has this been a distraction away from what is going on in the eurozone? >> i think it is always there as a side issue to deal with, but let's be clear. the big news for the eurozone has been what the ecb would do and digesting what they have delivered. the bigger news is the
underlying improvement in terms of consumer conditions albeit against a low hurdle. is that what is driving market sentiment? if we were to see a major escalation in ukraine or the greek berlin negotiation markets would take notice. markets want to trade on central-bank activity and macroeconomic earnings outputs. that seems to be what europe is focusing on. >> a big message. strip out the noise. the fundamentals in play. by european equities. but we have the first opportunity as we are seeing the growth gap between the u.s. and the rest of the developed world close up, the opportunities to diversify away from the risk into european risk, it is great from the point of view of those
it seems like it is off of the agenda. we understand the talks are over and the biggest move in the stock since -- in five years. one of the biggest followers is hunting and they say the expenditure estimates for customers of the current year continue to you've all rapidly and they say it is inappropriate for them to give full guidance for 2015. they say they are taking action and there has been a reduction of operating and hiring freezes.
meanwhile, it is up and back in the spotlight. see the cable company owned. could they be about to make an offer? potentially, a little consolidation. >> taking it back to a low note. they are offering their sincerest apologies. they wrote in several newspapers that they are in no appetite to do business with clients. what is the point. it is an bear sing for the bank. >> it is an bear sing and he took the legacy issues and
pointed out that the bank no longer does business with virtually everybody in this report. there is 140 key names they no longer do business with and he wanted to point that out. they hired 7000 people in compliance. i am a ceo making efforts to clean up the method to do business and the swiss ranking unit was cut. to remind anyone who does not follow this, this goes back to details from the geneva office with the kind of people they were doing business for between 2005-2007. gulliver and douglas are going
in front of the u.k. parliamentary hearing to talk about how they handled this report. this goes back to the tax authority and how they handled or did not handle the issue appropriately and the consequences of what they handled. it is a trickle-down effect. they had a criminal tax investigation and paid penalties. they are the first bank to admit a crime in a u.s. courtroom. the executive had a lot of people at play in this story. >> the value has been cranked up and this is the critical issue of the moment. >> it is a claim and
counterclaim. he accused them of having donors and one of the methods. the shadow chancellor had cameron employed stephen as the trade minister and this was months after hsbc and the political punch. >> they had 1000 individuals breaking the law and what happened was the guy in charge of the bank was a minister and did not ask questions.
there has only been one question. >> it is attacking the decision-making and i should say that it was very interesting watching the papers when asked. the owning of property has been discussion and going after cameron and his decision-making at the ethics of the government. do all political parties have such a thorough vetting process? >> they talk about political noise. is this a reputation issue?
does it translate to a bottom-line issue? >> last week, the stock was the worst performing and you take it to wider parameters and it was the worst performer in the index last week. however a ceo who is dealing with legacy unification. this is mark harton's stat. if it is wrong -- it won't be it is a barton stat. it is up on the tenure and the stock is up relative to the peers over 1% in the same span.
the biggest drop since last year. >> i would never question that the stats. the greek equity markets began trading a few minutes ago. they are down and the yields are up. a little bit of risk for the asset markets today. looking at the greek equities lower and it is always crunch talk. are we going to get the deal? it will be a long couple of weeks. the ftse 100 is down and the dax is coming off of an all-time high. we are back into.
what do we blame? >> 2% growth is the number and they have been doing market expectation and the result. we see consumption picking up and there is no slide. there is no need to take the number that tentatively. >> for you, as you look at the number into the bank of japan, i guess you cannot think the bank of japan needs to do more. the marginal returns have diminished in the point where doing more is pointless? >> i think there is a risk that it could do too much and i think it is on a good path to achieve that.
it is the one year and there is no need. there is a risk that japan could have too much inflation. the bank has to weigh the upside and downside risk and there is no need now. >> i look at the gdp number and you are positive about it. a lot of people are not. it really under delivered with the economy coming out of recession. we are seeing a tightening in the labor market. i am seeing job applicants and labor marketing -- labor market tightening. >> right. i would say that we will be seeing evidence of wage
inflation and the expectation is that it will be over 1% by the end of the year. it will push out of recession. i think you look at the growth outlook and there are positive elements. you look outside and it is good news. >> what about the bond market? is this good news? surely the yields are going to go higher. irrespective of how low the yields are, the dublin of the benchmark yields is that a concern? >> i do not think so. it is no longer obviously in a double.
0.4% is a bubble and, if it goes on, there could be issues in the bond market. i think it is happy to see the bond yield rising to a normal level. >> when you look at what the bank of japan is doing, it is 50% of the government bond market. you talk about the bank of japan doing too much. is it too much? >> i would say it is too much. the central bank is raising its market share in a matter of five years and that sounds dangerous. i think the bank of japan should refrain from easing and the knees to ease further, the bank
of japan should find some way. as far as the market is concerned, the bank of japan is done doing additional tinkering. >> you soon a are done and they are still buying government bonds. what are the ramifications of that? 's all that out. >> when the central bank owns the market, the bank of japan would have a hard time tapering. when it is a 50% owner of the market and getting out of the market who wants to buy into that? there has to be a serious structure and how the bank of japan tapirs. i think the bank of japan should do nothing to speed up the process. hopefully, before the market share, the bank of japan could
taper and make the exit strategy. i think the market share would be a mistake. >> outside of the bond market, i look at the equity market and the nikkei closing. what is the big driver of the equity market and what is the outlook when it comes to equity? >> people have different opinions. i think there is a good way the equity market would over perform. i think it is entering a second stage and japan is no longer dependent on demand. instead, export and a mastic demands. i think that second stage may
have +'s. i think global investors are disappointed so far. if the elements i explained i think they will be surprised. i look at the dollar yen and has sentiment changed? do the leaders want a stronger yen to take advantage of the commodity prices? >> yes. i think the japanese people are on easy about the deflation continuing to lower the price. there are certain groups within
>> welcome back. 52 minutes into the trading session. the ftse is lower and tesco is in focus. 10,000 jobs could go. here with an update at one of the egg is retailers is caroline hyde for they promise to become clearer. >> it is seeing reported in the telegraph that we could see 10,000 jobs going and the promises set out in the strategies last month said that
they were going to be cutting costs. how do you do that without making drastic cuts? it sounds like a lot. it is only about 2% of the workforce. we understand that asked thousand of the job cuts would come in the head office. another 4000 seem to be coming with how the company runs there stores. the role currently exists between the store manager and shop assistant. we do not know if the people would have alternative roles and if there would be other pay levels. that has yet to become clear. what is clear is that the man named dave had to reduce the
product and is having to wield the ax again. meanwhile, they are in the hunt for a new chairman. a former chairman could be one that they are after. the cost cuts they are having are coming. >> thank you. that is almost it. we turn the focus to what is coming up for the rest of the day. brussels is in focus. hans nichols will make it his way over today. what do we expect? it is pretty low going into the meeting. >> the bar is low and the deadline is ticking. the interview this morning, they
asked him how long he had and made a joke that it is not a leap year. there is not a lot of optimism about the prospects for a deal. all the finance minister -- all the finance ministers seem negative and there were harsh comments about the new greek government haven irresponsibly. the french minister had a warning about negative consequences if they did not come to some sort of agreement. the meeting starts at 2:00 and we start trying to get a readout in real time and find out what they put on it after they find it all out. >> i want to get to germany. the afd turned up and gave
support in the parliament. what is the significance of that? >> it looks like it will come in and allow them to enter parliament. merkel did not contest the election. she has been is he with greece and her personal credibility is not on the line. it does signify something. it is going to be in focus. look at them now. there is risk and it is down. they came down from 21 and towards 15 last week. it is up by 15 basis points. how often are we going to say she meeting in the next couple of months. you can follow me on twitter. welcome back to work.
>> inching out of recession. japan shows a soft rebound. deal or no deal. as the eurogroup meet in brussels, the german finance minister is skeptical. trees at risk. ukraine and pro-russian militants accuse each other of several violations on day two of the cease-fire. "the pulse welcome to -- welcome to "the pulse." prime minister abe's slow